Corporation

  • Corporation is a distinct legal entity that divides claims and debts of the company from the personal property of the company’s shareholders. Shareholders can enter into contracts and agreements, access their business rights and responsibilities under the name of their company, and their personal assets are legally protected from being ceased in the event the business fails.
  • Corporation may be registered jointly by one shareholder or multiple shareholders for profit-making purposes, operating together and distributing the profits in accordance with the shareholders’ agreement.

Protecting the Shareholders’ Personal Assets The biggest advantage of incorporating is the limited liability the company gives to its shareholders from its debt, obligations and liabilities, which are separate from those of its shareholders.

The Business may have Multiple Partners Under the agreement, shareholders can buy or sell shares of the company and assume responsibility within the scope of the shareholding and not be responsible for the personal debt of other shareholders.

Government Funding Under certain conditions, some industries and companies eligible for government support funding programs.
There are many ways to raise money to start or promote growth in your business. A limited liability company can raise funds by issuing shares, bonds and other forms of fundraising to increase its cash flow to start the business operations and encourage growth.

Encourage employees through shares Companies can offer shares to its employees as an incentive to encourage better performance, thereby enhancing the value of the company’s profits and shares. It’s a way to share the company’s success and profits with its employees, and increase the performance without affecting the controlling company.

Possible Tax Advantages of Limited Liabilities Company For example, a company that qualifies as a Canadian tax resident may qualify for a small businesses tax incentive.

Company’s Tax Avoidance Canadian high-income individuals who control operating company in Canada, rape the benefits of reducing their income tax rates, as opposed to those who don’t. Tax planning based on individual and corporate income, allows for a reasonable tax avoidance.

Real Estate Rights Holding and Contract Assignments The company can purchase the real estate and sign the contract under the company’s name.

  • One of the shareholders must be a Canadian resident or citizen
  • All shareholders must be over 18 years of age
  • Headquarters address needs to be within Canada

The difference between Federal and Provincial Companies

The companies can choose to incorporate their business on a federal or a provincial level. The main difference between the two is:

  • The registration of a federally incorporated company is more complex process due to the requirements of looking up company’s name. Registering a provincial company is a lot easier. Name search of a federal company requires to be conducted nationwide, hence the federal companies are called manual approvals. Not only duplicate business names are disallowed, but also any application similar to the existing company name is forbidden. Therefore, if you don’t require to offer your services outside of the province, it is recommended to register as a provincial company.
  • Federally incorporated companies who wish to set up their branches in other provinces, they also require registering their business in individual provinces in addition to the federal registration and their province of incorporation. If the company’s name is already registered in other provinces, it cannot be used again.
  • There is generally no difference in taxation or business operations of federally and provincially incorporated companies.
  • In most cases, the registration costs of a federal company are higher than a provincial company due to the costs associated with federal and provincial registrations. Federal registration and administration fees tend to be higher than those of provincial companies.

The only exception is Ontario.

  • Federal companies require annual inspection (which requires to be paid for), but Ontario companies are exempt; together with other provincial companies, that vary by province.

In Summary

If you are using a common registered name together with avoiding additional annual inspection, it is recommended to choose the provincial company. If you think that in the future you may want to set up branches in other provinces (no need to worry about this if its general sales related or in regards to a different business), federal incorporation is more suitable.